It is IPR Week in China, and once again there will be a flurry of reports that were presumably embargoed by Chinese agencies for the festivities of the week. It’s a bit of an ironic week, since IPR Week is followed in the United States by the Section 301 Report of the US Trade Representative, which means that most of the data released this week has not been made available to the US government in time for its consumption for the Section 301 Report.
One of the more interesting reports is the Supreme People’s Court report on IPR protection, which has been released in English and Chinese for some years now. It is available here in Chinese and English.
This year’s report is particularly detailed and appears to build upon concerns and critiques raised by many over the years. In this context, I believe the hard work of individuals like Chief Judge Rader, the annual visits of Intellectual Property Owners, concerns about the general commercial rule of law developments, and my own sporadic inquiries on various issues are also helping the SPC to look into trends that impact foreigners, as well as to collect information on local trends.
Here are some highlights:
Civil IPR Cases Continued Their Meteoric Growth. There were 87,419 civil IPR cases in 2012, an increase of 46% over 2011. Copyright cases and trademark cases both increased by approximately 53% to 53,848 and 19,815 respectively. Patent cases showed a more modest growth of 24%. Technology contracts remain disproportionately small, with an increase of 34% to only 746 cases. Antimonopoly cases numbered 55, and antiunfair competition cases (which include trade secrets) numbered 1123, a drop of 1%. This drop in unfair competition cases in the face of escalating IP cases generally and an increased interest in trade secret matters, suggests to me that the anti-unfair competition law needs revision to become more relevant to today’s market in China.
Provisional Measures are Still Under Utilized. Of the nearly 90,000 civil IPR cases, there were only 27 applications for a preliminary injunction, with a grant rate of 83%. There were 320 requests for provisional evidence preservation and 74 cases for provisional evidence preservation, with grant rates of 97% and 95% respectively.
Criminal Cases Showed an Even More Rapid Growth. According to the report, there was an increase of 130% in judicial adjudication of criminal IPR cases, to 13,104 cases. Infringement cases numbered 7840 cases, of which 4664 involved trademark infringement matters. The remaining cases appeared to involve IPR infringements that were prosecuted under non-IPR laws, such as illegal business operations. Some of these non-IP laws carry more severe penalties. This data also shows the impact of the efforts made by the State Council Leading Group in dealing with infringements and substandard products.
Administrative Cases Also On the Rise. There were 2928 IPR administrative appeals last year, an increase of 20% from 2011. Patent cases increased to 760 (16%) and trademark cases increased to 2150 (22%). I believe that most of these cases are appeals of patent and trademark validity decisions by the relevant administrative agencies. Relatively low growth in administrative appeals in the light of rapidly increasing patent and trademark filings and infringement cases, may reflect the difficulty of reversing administrative agencies.
Foreigners Play a Diminishing Role in Civil IPR Litigation, But a Significant Role in Administrative Litigation on IPR Validity. There was an increase of 8% in 2012 in foreigners using the civil IPR system, or 1,429. However, as a proportion of total civil IPR litigation, foreigners dropped from 2.2% to 1.6%. If current trends continue, I expect that foreigners will be less than 1% of the civil IPR docket in the next few years. By contrast, foreigners constituted 47% of administrative cases, for a total of 1,349. The large foreign share of administrative cases underscores the importance that foreigners attach to obtaining relevant rights, even if they are reluctant to enforce these rights, and also suggests that the foreign community should continue to engage the Beijing Intermediate and High Court on these important issues. The introduction in this year’s report of information on foreign utilization of the administrative system is a welcome set of data.
Transparency and Commercial Rule of Law Are Improving. The report notes that 47,422 IPR cases had been posted on the Supreme People’s Court case network through year-end 2012, which is still a fraction of the total numbers of cases. Another challenge that needs to be faced is finding a way to make these cases more easily searchable. The report also highlights numerous provincial-level local initiatives in improving IPR adjudication, on a range of issues such as electronic evidence, karaoke copyright disputes, notarization of evidence, etc. which is a useful listing of otherwise hard to get local initiatives. Another useful data point is that the overall judicial settlement rate of IP cases last year was 70%. As some have expressed concern about undue pressure to settle, comparative data on settlement rates in prior years might have been useful. It might also be useful in future years if the court provided more data to compare with general civil law developments, such as the availability of provisional measures in the civil procedure law, comparisons to trends in contract disputes generally, and comparisons to overall civil and criminal litigation trends.
The report also notes that the SPC has been actively involved in commenting on the revisions to the IPR laws now underway, as well as responding to requests from lower courts on various research projects. Considering the expansion in administrative enforcement in recent years, the constructive engagement of the courts on enforcement matters should be helpful to developing more balanced policies. Also, simultaneously with the court’s release of its white paper, it announced the 10 leading cases in China, 50 typical cases and 10 innovative cases. The innovative cases involved new legal issues and new thoughts on the application of law. As there is no IPR-specific case that has yet been announced by the Supreme People’s Court in its Guiding Cases Project these cases are likely to be of greater influence.
The report also gives a shout-out to the highly successful Federal Circuit Bar Association program of May last year, which had over 1,200 attendees, 240 Chinese judges, over 200 US attendees, and seven federal circuit judges in attendance including Chief Judge Rader.
At a meeting hosted on April 22 by the US Chamber of Commerce, speakers noted that the IPR tribunal is once again looking at the possibility of establishing a specialized IP court in China, an issue that was previously flagged in the National IPR Strategy Outline of some years ago. In this context, the report also discusses the numbers of IPR judges, IPR tribunals, experiments in combining civil, criminal and administrative adjudication, and background of the judges.
The report provides a useful snapshot of an increasingly influential, busy and complex IPR adjudication system in China.